Bank of England policymakers unanimously decided to keep the interest rates unchanged for the first time in seven months, as Ian McCafferty abandoned his call for a hike, and also signaled that record low rates are unlikely to rise in the foreseeable future.
The U.K. central bank also downgraded its growth projections in the wake of subdued global activity and continuing fiscal consolidation.
The Monetary Policy Committee, headed by Mark Carney, voted 9-0 to hold the interest rate at 0.50 percent, the Bank of England said in a statement on Thursday.
The rate has been held at this record-low level since 2009. McCafferty dropped his call for a quarter point rate hike for the first time since July.
The Committee still looks primed to move quickly to raise rates in the second half of this year, provided the U.K. votes to remain in the E.U., Samuel Tombs, chief U.K. economist at Pantheon Macroeconomics, said.
For one member, the more prolonged period of low inflation suggested that the pickup in the pace of wage growth would be initially more muted than previously expected, the minutes showed.
Policymakers also unanimously voted to maintain quantitative easing at GBP 375 billion.
A rate rise this year is likely, and now expect the MPC to hike Bank Rate in November 2016, Ruth Miller at Capital Economics, said.
In the Inflation Report, the bank said GDP growth is projected to be 0.5 percent in the first quarter of this year.
The central bank downgraded its growth outlook for this year to 2.2 percent from 2.5 percent and the projection for next year to 2.4 percent from 2.7 percent.
“The MPC judges the risks to the central projection to be skewed a little to the downside in the near term, reflecting the possibility of greater persistence of low inflation,” the BoE said.
“Low realized inflation will continue to moderate the increase in wage pressure in the near term.”
Inflation is projected to increase further in the coming months but a little less quickly than anticipated in November, largely reflecting recent falls in oil prices.
Price growth is expected to remain below 1 percent through this year. The bank estimated inflation to reach its 2 percent target only in the first quarter of 2018.
The bank aims to return CPI to target in around two years, Carney told reporters.
The bank also lowered its wage growth estimate, forecasting pay to rise 3 percent in 2016 instead of 3.75 percent.
As inflation has remained below 2 percent target by more than one percentage point, Carney wrote yet explanatory another letter to Chancellor George Osborne.
Carney said inflation remained below target due to the fall in commodity prices, the past appreciation of sterling and below-average growth of domestic wage costs.
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